Levine Leichtman Capital Partners (LLCP) is selling a Dutch education firm it acquired just two years ago, capitalising on a coronavirus-induced surge in demand that it hopes will justify a price of at least €80 million, EducationInvestor Global can reveal.

This publication has learnt that LLCP has hired Netherlands-based bank ING to offload its controlling stake in Squla, a 10-year-old edutainment platform the mid-market buyout group took over in June, 2018.

The timing of the sale is peculiar, as private equity firms typically hold onto companies for at least three years before flipping them at a premium. 

But LLCP is understood to be pursuing an opportunistic exit from Squla, which “did well amid Covid because teachers were recommending it to parents, who bought the product for their kids to study at home” while schools were closed, a source said.

Squla’s annual earnings before interest, tax, depreciation and amortisation have “probably doubled” to €7-8 million under its ownership, the insider said.

Profit growth has been boosted by a boom in paid subscriptions to Squla’s app, through which children in kindergarten to Grade 6 “play and learn” by taking educational quizzes and watching “fun instructional videos on all subjects”. In-app purchases have also increased, it is understood, while at the same time Squla has proliferated in classrooms across the Netherlands.

It has also entered new markets. Last month, Squla expanded into Germany through its acquisition of Scoyo, an online-learning platform geared at primary and secondary school students.

If Squla can sustain the growth rate it has achieved throughout the pandemic, it could trade at a “mid-teens” price-to-earnings multiple, said one well-placed M&A advisor. This, if achieved, would result in a transaction worth over €100 million, while more conservative calculations indicate a valuation of at least €80 million.

LLCP, meanwhile, closed its second European fund this week with €436 million in capital commitments.

“It’s a quick exit for sure,” said one dealmaker, “but the business has performed well. And, I think LLCP wants to register a good exit in Europe. They just closed their second European fund, so will want to show momentum not just with fundraising, but also with exits.”

The sale of Squla is being explored after LLCP dropped out of a race to acquire a minority stake in a tie-up between two UK school management information system providers, Arbor Education and The Key.

ING has compiled a prospectus for Squla, which it is circulating among a “broad” range of investors across Europe, a source said.

LLCP had not responded to a request for comment at the time of publication. A spokesperson for ING declined to comment.

Launched in 2010 by André Haardt, who is a shareholder, and based in Amsterdam, Squla provides interactive educational tools for young school students.

It is linked to the Dutch national curriculum and is designed to supplement students’ education in a “fun and adaptive” way.

Squla, among other ed techs, has been a beneficiary of the coronavirus crisis, which has hampered traditional provision but catalysed adoption of digital alternatives.

Venture capital funds have been raining money onto embryonic ed techs at record levels. Some online education providers are pursuing stock market flotations. Others have sought growth capital from private equity funds to bankroll capacity expansions in response to rising demand.

In addition to Squla, LLCP’s portfolio companies in the education arena include GL Education, a UK-based assessment provider, and SiPM, a Belgian e-learning provider it bought in June.

US-headquartered LLCP manages nearly $7 billion of assets.

Date published: 16 October 2020

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